Opinion
No. A06-647.
Filed January 23, 2007.
Appeal from the District Court, Hennepin County, File No. 27-CV-05-008301.
James R. Bettenburg, Bettenburg Law Firm, St. Paul, MN, (for respondent).
Brian A. Wood, William L. Davidson, Sara J. Lathrop, Lind, Jensen, Sullivan Peterson, P.A., Minneapolis, MN, (for appellant).
Paul D. Peterson, Lori L. Burgan, Harper Peterson, P.L.L.C., Woodbury, MN, (for amicus curiae Minnesota Trial Lawyers Association).
Considered and decided by KLAPHAKE, Presiding Judge; KALITOWSKI, Judge; and WRIGHT, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2006).
UNPUBLISHED OPINION
This appeal arises out of the district court's entry of summary judgment in favor of respondent Shari Mathena against her underinsured motorist insurer, appellant Allstate Insurance Company. Appellant argues that the district court erred (1) by determining that it waived its right to a jury trial by failing to timely intervene in the underlying action between its insured and the tortfeasor; and (2) by granting respondent interest accruing from the date of the arbitration award. We affirm.
FACTS
The facts are undisputed. Plaintiff-respondent Shari Mathena was injured in an automobile accident with Sara Jean Clough, f/k/a Sara Jean Hagen, in 1999. On May 27, 2003, Mathena filed suit against Clough in Hennepin County District Court. Clough had a liability insurance policy with a limit of $50,000, while Mathena maintained $50,000 in underinsured motorist (UIM) coverage through her insurer, appellant Allstate Insurance Company (Allstate). On September 12, 2003, the district court referred the parties to mediation as part of its scheduling order.
On April 21, 2004, Mathena notified Allstate by letter of her claim against Clough. The letter expressly noted that damages would likely exceed Clough's policy limit and Mathena would likely make a claim against Allstate for UIM benefits. The letter also informed Allstate that the claim had been referred to a mediator and invited Allstate's participation in the mediation. The letter requested that Allstate notify Mathena of its intentions regarding intervention in the action.
On April 30, 2004, Allstate responded in a letter requesting additional information. On May 6, 2004, Mathena provided Allstate with the requested information. Allstate never replied to Mathena's follow-up letter and did not participate in the mediation between Mathena and Clough that occurred on May 26, 2004. Mediation did not result in a settlement, but Mathena and Clough stipulated to submit the matter to binding arbitration.
On June 1, 2004, Mathena forwarded a copy of the arbitration stipulation to Allstate and again notified Allstate that if her damages exceeded $50,000, she would pursue a claim against Allstate for UIM coverage. In this correspondence, Mathena invited Allstate to intervene in the arbitration proceedings. Allstate responded by informing Mathena that it did not agree to arbitrate the matter and that it would not be bound by an arbitration award. The insurance contract between Mathena and Allstate states that "[i]f the insured person and [Allstate] do not agree to arbitrate, then the disagreement will be resolved in a court of competent jurisdiction."
On October 28, 2004, a panel of arbitrators awarded Mathena damages in the amount of $67,500. On November 2, 2004, Mathena forwarded the arbitration award to Allstate and again noted that she was seeking UIM benefits because the award exceeded Clough's $50,000 policy limit. This correspondence also included a Schmidt-Clothier notice of arbitration award inviting Allstate to substitute a check for $45,000 (the amount owed by Clough's insurance company) in order to preserve its subrogation rights. Allstate responded on November 24, 2004, refusing to substitute a check and again noting that it did not agree to arbitration and was not bound by the arbitration award.
On January 25, 2005, Mathena and Clough agreed, by stipulation, to confirm the arbitration award. A copy of the notice of motion and motion to confirm the award of the arbitrators was sent to Allstate on January 27, 2005. On February 10, 2005, more than eight months after it was first notified of the pending action between Mathena and Clough, Allstate filed a motion to intervene in the action.
On March 1, 2005, the district court denied Allstate's motion to intervene and confirmed the arbitration award for $67,500. The district court denied the motion because it found that intervention at this late stage of litigation presented substantial prejudice to Mathena and Clough pursuant to Minn. R. Civ. P. 24.02.
On May 23, 2005, respondent Mathena filed a separate action against appellant Allstate to recover UIM benefits for that part of the arbitration award not covered by Clough's insurance policy. On November 16, 2005, Mathena filed a motion for summary judgment arguing that Allstate was bound by the arbitrator's award and estopped from relitigating the issue of damages because it was given the opportunity to intervene in the action and chose not to do so. On November 22, 2005, appellant Allstate filed its own motion for summary judgment arguing that it had been denied its constitutional right to a jury trial and was not obligated to participate in arbitration or accept the arbitration award.
The district court granted summary judgment for respondent Mathena, making the arbitration award between Mathena and Clough binding on appellant Allstate. The district court reasoned that Allstate had waived its right to a jury trial by failing to intervene in a timely manner in the underlying action between Mathena and Clough. The court stated "Allstate remained silent for more than eight months after commencement of the tort action and . . . did not seek to intervene until one week before the hearing . . . to confirm the arbitration award." Thus, "Allstate waived its right to a jury trial . . . and is bound by the damages arbitration award obtained by Mathena against Clough."
Over Allstate's objection, the district court also entered judgment for interest accruing from the date of the arbitration award.
DECISION I.
Allstate argues that the district court denied its constitutional right to a jury trial and procedural due process by making the arbitration award between Mathena and Clough binding on Allstate, and thereby precluding Allstate from litigating the issue of damages before a jury. We disagree.
Because this case was decided on summary judgment and the material facts are undisputed, we review the district court's interpretation and application of the Minnesota Constitution de novo. Abraham v. County of Hennepin, 639 N.W.2d 342, 348 (Minn. 2002).
An injured claimant may only pursue a UIM benefits claim after recovering from the tortfeasor's liability insurance policy. Employers Mut. Cos. v. Nordstrom, 495 N.W.2d 855, 858 (Minn. 1993). The claimant may recover either by "(1) pursu[ing] a tort claim to a conclusion in a district court action, . . . or (2) settl[ing] the tort claim for `the best settlement.'" Id. at 857. If the judgment or settlement in the underlying tort action exceeds the tortfeasor's liability coverage limits, the injured claimant may then pursue UIM benefits. Id. n. 3. "If the insured pursues the `best settlement' option, prior to settling any claims with the tortfeasor, she must provide her UIM carrier with a 30-day written notice of tentative settlement agreements in order to give the underinsurer an opportunity to protect its potential right of subrogation." Kluball v. Am. Family Mut. Ins. Co., 706 N.W.2d 912, 916 (Minn.App. 2005) (citing Schmidt v. Clothier, 338 N.W.2d 256, 263 (Minn. 1983)).
"[A]rbitration is an appropriate way to arrive at a `best settlement'" and arbitration awards are recognized as "final judgment[s] of both law and fact and produce a legal entitlement to underinsured benefits no different from a judgment following a jury verdict." Murray v. Puls, 690 N.W.2d 337, 341-42 (Minn.App. 2004) (quotation marks omitted), review denied (Minn. Mar. 15, 2005). An arbitration award in an underlying action binds both the injured party and the UIM carrier in a subsequent action between them so that neither may relitigate the issue of damages. Butzer v. Allstate Ins. Co., 567 N.W.2d 534, 536 (Minn.App. 1997).
The Minnesota Constitution provides that "[t]he right of trial by jury shall remain inviolate, and shall extend to all cases at law without regard to the amount in controversy," Minn. Const. art. I, § 4; see also Minn. R. Civ. P. 38.01 (stating that issues of fact shall be tried by a jury in actions for the recovery of money). "If not expressed affirmatively, the intent to waive a jury trial must appear by necessary inference from unequivocal acts or conduct." Aufderhar v. Data Dispatch, Inc., 452 N.W.2d 648, 653 (Minn. 1990).
Allstate was given notice and invited to intervene in the underlying action between Mathena and Clough on April 21, 2004, and failed to take any action until February 10, 2005, when it attempted to intervene for the first time. During this nearly nine-month period, Mathena notified Allstate of the potential UIM claim and invited Allstate to intervene in the action. Mathena provided Allstate with requested information regarding the underlying litigation. Mathena informed Allstate of the progress of the underlying claim throughout this period, repeatedly inviting Allstate to participate in mediation and arbitration and asking Allstate if it intended to intervene in the action.
During this time, Allstate had notice of the potential UIM claim and the opportunity to investigate the nature of the underlying tort claim to determine whether intervention or abstention would best protect its financial interests. Allstate chose abstention and did not try to intervene until the issue of damages was conclusively established through binding arbitration and the parties sought judicial confirmation of the award. We conclude that under these facts, the district court properly determined that Allstate's failure to intervene for more than eight months is unequivocal conduct evincing a waiver of its right to a jury trial.
Finally, Allstate also argues that the district court denied its rights to procedural due process. Procedural due process requires notice and the opportunity to be heard. Malmin v. Minn. Mut. Fire Cas. Co., 552 N.W.2d 723, 728 n. 4 (Minn. 1996) (citing Fuentes v. Shevin, 407 U.S. 67, 80, 92 S. Ct. 1983, 1994 (1972)). Here, the record indicates that Allstate was given notice and invited to participate at every stage of the litigation between Clough and Mathena. Thus, we conclude that Allstate's procedural due process rights were not violated.
II.
The district court awarded respondent interest on her award of $22,500 against appellant, running from the date of the arbitration award, October 28, 2004. Appellant argues that such an award is improper because it constitutes preaward interest which is improper for future damages under Minn. Stat. § 549.09, subd. 1(b)(2) (2004). We disagree.
Generally, this court will not disturb a damage award unless "failure to do so would be shocking or would result in plain injustice." Hughes v. Sinclair Mktg., Inc., 389 N.W.2d 194, 199 (Minn. 1986). Here, because the interest awarded by the district court began to accrue on the date of the award and not before it, the award does not violate Minn. Stat. § 549.09, subd. 1(b)(2), and the district court did not err.